John Block Reports from Washington

Food Prices

Oct 23, 2008

Isn’t it a little hard now to blame the higher food prices on corn-based ethanol? All spring and summer, the food manufacturing companies pointed their finger at corn going to fuel and used that as an excuse to jack up their prices.

But now, corn, soybean, and wheat prices are cut in half from their summer highs. Food companies are raking in record profits. Corn is cheap again. This week, I was on the combine harvesting that golden grain. WE have a near record crop in this country this year. All the complaining and finger-pointing at high grain prices has proven to be a convenient excuse for food companies to raise prices. Bread prices climbed 20%. Hershey announced a 10% price increase last week. I don’t think cocoa competes with corn for crop land. Food companies are out-performing the sick stock market. Kellogg’s and General Mills and Nestle profits are up more than 10%. Doesn’t sound like the food companies’ bottom line has suffered.

Since high grain prices were the reason for raising food prices, maybe lower grain prices could be a reason to reduce food prices. Of course, we know they won’t do that.

I’m not really critical of the food companies for making money. They do a terrific job. Our cost of food in this country is the most reasonably priced in the world. With all the noise about expensive food – over all, we’re just looking at about a 5% increase.

My bone to pick with the grocery manufacturers is that they funded a major campaign to discredit ethanol, blaming the food price increase on ethanol, and then used that as an excuse to raise prices.

The market will have to sort all of this out. Farm costs are up too. The cost of raising a bushel of corn next year is estimated to be double what it was 2 years ago. We are applying nitrogen now to feed next year’s crop. It costs double what id did a year ago.

The food industry in this country does a great job. I just think we should avoid a family fight.